What is swing trading cryptocurrency?
Swing trading is a well-known active trading strategy. Traders try to catch short- to medium-term price movement inside a certain range. Swing traders trade differently than day traders. In such trading style, a trader holds a position open for many days or maybe weeks. Typically, no more than one month!
Swing traders utilise technical analysis to identify trading opportunities, although not to the same degree as day traders. Fundamental analysis may also help a swing trader’s approach to some extent.
Swing Trading Crypto
Swing trading seeks to benefit on price discrepancies over a medium-sized time span. However, there are a couple problems when we apply this concept to crypto assets. The issues arise mostly as a result of the volatility nature of the cryptocurrency market as a whole.
There are a few things that should be kept in mind before swing trading cryptocurrency:
Focus on the Whole: In the realm of cryptocurrency, you cannot benefit from a single asset. After all, you may trade a single item, but you should have a thorough knowledge of the market at all times. Only then will you be able to comprehend how one’s investment sets in with other forms of assets, this also includes Bitcoin.
Higher Risk: While swing trading crypto, one should be ready to lose. This does not mean lose all that you have! But yes, one should be prepared with some money which he/she can afford to lose.
Methods for Swing Trading Cryptocurrency
When swing trading cryptocurrency, you may use a variety of methods, but it will take some time to figure out which ones work best for you.
Two common instances are given below. Several methods can be used while swing trading cryptocurrency. However, one might take some time to make an analysis for the best fit. Let us have a look at two common instances:
‘Stuck In A Box’
This technique uses support and resistance levels to follow a market range. As a result, the market is often referred to as being trapped in a box between the two lines above and below:
‘Catch The Wave’
As the name suggests, the aim of this strategy is to catch one move in a trending market, whereby you enter after the pullback has ended.
Tools for Swing Trading Cryptocurrency
Whether you trade Bitcoin or other altcoins, having several tools at your disposal may greatly improve your swing trading approach and give you peace of mind when things go tough.
Types of Trading provided - Social & Copy Trading
If you’re a novice who wants to witness swing trading cryptos in action, you may always search for a broker that provides copy trading. This enables you to exchange trading ideas and replicate other successful trades, making it an excellent tool for new traders.
Within the site, you can also look for copy-trading suppliers that have perfected their swing trading technique. For novices, eToro, for example, offers one of the finest social and copy trading platforms.
Automation & Signals
Automated technologies, such as crypto bots and signals, may assist you in executing more transactions more quickly. Trading robots will monitor the market and purchase and sell assets automatically when certain conditions are fulfilled.
There are many kinds of robots available to fit different swing trading techniques. You may also create bots to fit your needs, such as volume, orders, time, and pricing.
Similarly, some systems give a wide variety of signal sources that may be handled by another trader or completely automated. These may be used in conjunction with swing trading crypto techniques since they can run overnight while positions are still open.
Price action and candlestick chart patterns are frequently analysed by crypto swing traders utilising support and resistance levels, the Relative Strength Index (RSI), Bollinger Bands, Fibonacci retracement, volume, the Stochastic oscillator, and moving averages.
Technical analysis tools assist traders in identifying bullish and bearish zones on a chart where they may buy and sell. Traders will look for two kinds of opportunities: trends and breakouts. Long-term market movements characterised by short-term oscillations are referred to as trends. Breakouts mark the beginning of a new trend.
Moving averages are one of the most often utilised techniques in swing trading. These compute the mean of a crypto asset’s price fluctuation over time. If a crossing is seen, it may suggest either bullish or bearish momentum. Moving averages may also be used as support and resistance levels.
One of the most important things to remember for any swing trading cryptocurrency approach is that one should never take risks blindly. Only invest as much as possible. Setting stop-loss limits is the greatest method to minimise risk while you’re in a transaction.
Because swing trading often necessitates holding positions overnight, stop losses must be established to safeguard your money while you are away from your computer.
Pros Of Swing Trading Crypto
Swing trading is a great technique to learn since it is not as difficult as other crypto trading tactics. You also have the following advantages:
- Long-term approach — Unlike other types of trading, swing trading does not need hours of monitoring transactions since trades may last days or even weeks.
- Lower intensity — Because of the longer timeframe and lower frequency of transactions, many traders believe swing trading cryptos to be less stressful than day trading.
- Part-time trading — You can easily manage trading with your work. Thusl it becomes an additional source of income.
- Volatility — For swing trading cryptos, like bitcoin, there is a need for volatility. This might tempt experienced traders who have an expertise in trading in such kind of markets.
Cons Of Swing Trading Crypto
Swing trading cryptos, unsurprisingly, may be challenging for both beginner and experienced traders:
- Overnight risk Because swing traders maintain positions for a longer length of time than day traders, they are more likely to incur large losses.
- Price gaps – Sometimes news in the market occurs after hours. Due to this, few traders might witness price gaps when they hold positions overnight or over the weekend.
- Market timing – Even seasoned cryptocurrency traders may find it challenging to predict market changes.
Swing trading is a popular trading technique in both the stock market and cryptocurrencies. Swing traders usually hold positions for a few days or weeks, depending on the trade structure.